Freddie Mac expands price break for low-income borrowers

Freddie Mac on Monday announced it'll be expanding the offering of a $2,500 credit to prospective homebuyers with low down payments for one income tier, and is considering allowing certain other borrowers to make use of it who hadn't previously qualified. 

The $2,500 credit available to borrowers making 50% of the area median or less will soon be available in conjunction with the Home Possible low down payment product. It can be used with Freddie's down payment assistance or other public DPA programs it works with.

The expanded availability of the credit, which Freddie previously had been offering with select loan sellers since 2018 as part of its BorrowSmart program, will come at the same time Fannie Mae rolls out a similar offering through its HomeReady program on March 1. Freddie Mac has helped 35,000 borrowers with its predecessor program to date.

"By associating it back with Home Possible, that program is now more broadly available," said Kevin Kauffman, head of client engagement at Freddie Mac. "This allows us to get this next version of BorrowSmart to scale. We can now offer this across the board versus reaching only a limited set of sellers and a limited set of consumers."

Freddie is contemplating taking the program a step further by offering something similar that  may be appropriate for low-income borrowers who make 80% of the area median income, he added.

"We're evaluating that as a different program," Kauffman said. 

The $2,500 credit that will be available to very-low income borrowers next month must be used to fund a down payment, closing costs, escrow or mortgage insurance premiums. It'll be available through Feb. 28, 2025.